What Foreclosure Crisis?
The Wall Street Journal is reporting that the administration has a new
scam scheme plan to make the foreclosure mess go away.
The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force America's largest banks to pay for reductions in loan principal worth billions of dollars.
Terms of the administration's proposal include a commitment from mortgage servicers to reduce the loan balances of troubled borrowers who owe more than their homes are worth, people familiar with the matter said. The cost of those writedowns won't be borne by investors who purchased mortgage-backed securities, these people said.
If a unified settlement can be reached, some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers, these people said.
Gee, somehow $20 billion doesn't sound like it's nearly enough to do the job. At least not if the "job" is actually reducing loan principals on underwater mortgages. One of the WSJ sources described the number of homeowners who would actually be helped by this deal as "limited." Zero Hedge phrased it a little differently:
In one fell swoop the teleprompter will not only grant reprieve to the banks for decades of fraudulent mortgage activity, but undercapitalize themselves and have them at risk for another liquidity run, which would of course mean another record multi-trillion taxpayer bailout. And the worst case: the 10 million or whatever underwater mortgages will get an average reduction of $2000 each. This is unfuckingbelieveable!
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There's a good chance this proposal will go nowhere, according to the Journal. OTOH, if this is just another gigantic gift to the banks at the expense of the taxpayers, how could it not happen?